US-based companies have been at the forefront of the AI revolution, but now it looks like a new challenger has emerged. China-based DeepSeek is just over a year old, but the startup has released an open-source AI model called R1 that seems to have the rest of the industry worried.
DeepSeek was founded in 2023 by Liang Wenfeng, the co-founder of High Flyer, an AI-driven hedge-fund (via Bloomberg). Despite being a mere fledgling in the AI world compared to some of the bigger names like OpenAI and Meta, the DeepSeek V3 family of AI models appear to be much more efficient than competitors' efforts like ChatGPT.
Now R1, a new reasoning model fine-tuned from V3 training, also appears to be comparable in performance and accuracy to OpenAI's efforts.
The Register has performed some early testing on R1 in comparison to OpenAI's o1, a similar "Chain of Thought" (CoT) model, and found that its capabilities seem remarkably similar—with the former even beating out the OpenAI model in the MATH-500 test.
All while costing much less to train, with a Chiphell forum user claiming that "DeepSeek-R1 is priced at only about 3.65% of OpenAI o1" per million outputs.
That's potentially bad news for Nvidia, which has been raking in cash as a result of high sales of its AI accelerator hardware to run the latest models at scale, taking the company's valuation up to the highest by market cap in the world at time of writing.
According to some analysts, Nvidia's stock price is on track to shed nearly $400 billion dollars in the wake of R1's launch, although it appears to be holding relatively steady after a slump in early Monday trading. Dutch chip-maker ASML has seen its share price fall by more than 10% since R1's launch, while Siemens Energy dropped by 21%.
US venture capitalist and advisor to Donald Trump, Marc Andreessen, made the comparison of R1's launch to the US and USSR space race, calling it "AI's Sputnik moment." Sputnik was a satellite launched by the USSR in 1957, and is widely thought to have wrongfooted the US government on the Soviet Union's space capabilities, leading to a space race between the two nations.
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The elephant in the room, however, is trade sanctions. The US government has banned the export of high-end AI hardware to China, which some have speculated has led to a more efficient approach resulting in DeepSeek's new models. If so, that would suggest that the sanctions haven't had the effect that the US gov may have hoped.
However, being a Chinese product (and given that many of the leading AI companies are US-based), it seems possible that restrictions may follow on its use for US companies, and potentially even those using US equipment, in the same fashion as the current trade sanctions.
Either way, the release of DeepSeek-R1 appears to have caused a significant rumble in the AI markets. Whatever happens next, it seems that the US may no longer hold all the keys to advanced AI—and the world awaits it's response.
